By Jeff Manning and Hillary Borrud

The Oregonian

After an influence-peddling inquiry that dragged on for 28 months, federal prosecutors said Friday they have pulled the plug on the investigation of former Gov. John Kitzhaber and his girlfriend, Cylvia Hayes.

Kitzhaber resigned as governor in February 2015 following revelations Hayes had received more than $200,000 worth of consulting contracts because of her connection to Kitzhaber and others in his office.

In a terse statement Friday, the U.S. Attorney’s office said, “The investigation by the United States Attorney’s Office for the District of Oregon, the Justice Department’s Criminal Division, the Federal Bureau of Investigation, and the Internal Revenue Service – Criminal Investigation into the alleged misuse of former Governor Kitzhaber’s and Ms. Hayes’ positions for their personal benefit has concluded and no federal criminal charges will be sought. The United States will not comment further on this matter.”

The development is a stunning vindication for Kitzhaber, who has always insisted he did nothing wrong. Even as he stepped down in February 2015, just weeks into his fourth term, he blamed a media frenzy that had made it impossible for him to effectively govern.

Kitzhaber took to Facebook on March 5, his 70th birthday, claiming he was a victim of “fake news” long before the phrase was brought into the popular political parlance by President Donald Trump.

“Fully two years before the 2016 election normalized this phenomenon, I got to be a pioneer (or maybe that was a guinea pig) in this brave new world of politics with emails, social media, click for cash tabloid ‘journalism’ and fake news,” Kitzhaber wrote.

But there was nothing fake about the more than $200,000 Hayes collected from work she did for private nonprofits who recognized her influential role. Hayes served as an official and unpaid adviser on state environmental and economic policies.

As Hayes demanded more access and influence, Kitzhaber’s staff grew alarmed and tried unsuccessfully to rein her in.

A federal grand jury issued a subpoena on Feb. 13, 2015, for state records on the couple related to Hayes’ consulting contracts. The order came a day after Willamette Week reported that the governor’s executive assistant had asked an information technology employee to delete emails from Kitzhaber’s private email accounts that had been archived on state computer servers. The IT department refused.

Kitzhaber used a private email account for state business, but messages from a second account that reportedly was limited to personal use were also archived. A spokeswoman for Kitzhaber said that removing the emails from the state’s central server was simply part of the review process to determine whether any of the private emails should be retained as public records. Lawyers for Gov. Kate Brown, who succeeded Kitzhaber, later determined that emails from both accounts were public records, because he used them to discuss state business.

Hayes’ largest and longest-running private contract during Kitzhaber’s tenure was as fellow at Clean Economy Development Center. The Washington, D.C.-based nonprofit paid Hayes $118,000 — $30,000 in 2011 and $88,000 in 2012 — income that was not reported on federal tax forms she provided. Two of Kitzhaber’s longtime associates, campaign adviser Dan Carol and deputy chief of staff for field implementation Greg Wolf, helped connect Hayes with this and at least one other job.

It was initially unclear what work Hayes produced in exchange for the payments, because neither she nor the Clean Economy Development Center’s executive director responded to questions about the subject. Later, a spokeswoman for the Energy Foundation — a large San Francisco-based nonprofit that paid most of the fellowship — said Hayes was paid to promote clean energy businesses and jobs and speak at events such as University of Oregon’s Earth Day. The foundation, which promotes renewable energy and efficiency, hired Hayes after the fellowship ended, paying her $50,000 to do similar work.

With a different contract, emails released in response to a public records request revealed Hayes was directing state employees to implement an alternative economic measure called the Genuine Progress Indicator, the same policy Hayes was paid to promote by a New York advocacy group called Demos. Emails also showed Kitzhaber telling a top state administrator “we need to find a way” to hire a man who knew Hayes and had worked for the group paying her.

But proving that Kitzhaber or Hayes committed a crime would have been difficult, much more so after the U.S. Supreme Court last summer tossed the corruption conviction of former Virginia Gov. Robert McDonnell and his wife, who accepted $175,000 in cash and gifts from a Virginia entrepreneur.

Chief Justice John Roberts acknowledged the seamy nature of the McDonnell case but said that prosecutors needed to show a direct quid pro quo — that the officials did something in their official capacity in return for the gifts. “Setting up a meeting, calling another public official, or hosting an event does not, standing alone, qualify as an ‘official act,” he wrote.

A key question in the Kitzhaber case was whether he had used his position and state resources to benefit Hayes and open doors for her consulting business. The governor considered Hayes part of his household, and reported receiving income from her business on his state financial disclosure.

An early note from Kitzhaber to his then-chief of staff Curtis Robinhold revealed for the first time how the governor advocated for Hayes’ overlapping roles.

“Cylvia needs to be advocating the same clean economy policy in her role as spokesperson/advocate for the Governor’s Office and her role as a Clean Economy fellow. There cannot be any daylight between them,” Kitzhaber wrote in August 2011, in comments on a draft plan for Hayes’ role in the governor’s office.

When federal investigators issued a subpoena for state documents related to Hayes’ contracting, they also asked for the Oregon Justice Department’s investigative files concerning the governor’s office and state agencies. That would have covered a 2010 investigation into Oregon Department of Energy officials efforts to secure a subcontract for Hayes, after her firm came in last in the bidding for the primary contract. Hayes was never a target of the investigation, and the Justice Department never filed charges against the state officials it investigated.

At the same time Hayes’ consulting jobs came under scrutiny, the former first lady admitted she’d married an 18-year-old Ethiopian man in 1997 in exchange for $5,000, to help the man gain residency in the United States. Hayes said she did not report that income on her taxes.

Since his resignation, Kitzhaber and Hayes have struggled to reinvent themselves and make a living with the federal investigation hanging over their heads.

Kitzhaber has been slowly re-entering the public world, usually speaking about health care before various community groups. In March, he wrote a post on Facebook describing his personal journey.

“I have known public rejection and the personal rejection by people I thought I knew — the leadership of my own party,” he wrote. “But I also got to know true adversity and how it feels to see all I gave my life to fall apart before my eyes,” he continued, “how to learn from the experience, how to stoop and pick up the pieces; and grow and move on.”

Hayes stills runs her 3E­Strategies, a sustainability consulting firm. According to her website, she also is a “strategic intervention coach” certified by self-help guru Tony Robbins and specializing in assisting people suffering “shaming and trauma experiences.”

She describes a particular kind of bullying in which “the person being targeted made a mistake that set the whole thing in motion and the response to that mistake is way overblown and out of proportion due to sensationalist media and anonymous cyber-bullying.”

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